Abbatematteo v. Federal Housing Finance Agency et al

Filing 22

MEMORANDUM AND ORDER issued by Chief Judge William E. Smith: granting in part and denying in part 10 JP Morgan Chase Bank, N.A Motion to Dismiss. Motion granted as to Count Three (good faith and fair dealing) and Count Five (extreme good faith). Motion denied as to Count One (due process), Count Two (breach of contract), Count Four (misrepresentation), and Count Six (Regulation X). (Perry, Frank)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
___________________________________
)
LILIA MARIA ABBATEMATTEO,
)
)
Plaintiff,
)
C.A. No. 17-331 WES
)
v.
)
)
)
FEDERAL HOUSING FINANCE AGENCY,
)
FEDERAL NATIONAL MORTGAGE
)
ASSOCIATION, AND JP MORGAN CHASE
)
BANK, N.A,
)
)
Defendants.
)
___________________________________)
MEMORANDUM AND ORDER
WILLIAM E. SMITH, Chief Judge.
This case is before the Court on a Motion from Defendant JP
Morgan Chase Bank (“Chase”) to Dismiss (ECF No. 10) the Complaint
(ECF No. 1) filed by Plaintiff Lilia Maria Abbatematteo.

After

reviewing the alleged facts, the Court DENIES all but part of
Chase’s Motion.
I.

Background
On November 15, 2002, Maria E. Amaral, Plaintiff’s mother,

borrowed $90,000, which was recorded on a promissory note, and
secured by a mortgage on Plaintiff’s primary residence.
Compl. ¶¶ 47-48.)

(See

The mortgage was signed by Amaral, Domingos P.

Arruda, and Plaintiff.

(Id.)

In June 2003, these three signed a

corrective quitclaim deed, which granted them title as joint

tenants.
away.

(See id. at ¶ 49.)

(Id. at ¶ 51.)

On August 31, 2009, Amaral passed

A few months later, Arruda moved out and

stopped contributing to payments due on the note.

(Id.)

Later,

when Plaintiff’s wages dropped, she fell behind on the mortgage
payments.

(Id.)

On September 6, 2013, Fannie Mae foreclosed on

the property, and on May 12, 2014, Plaintiff filed an action in
federal court (“Abbatematteo I”), before applying for a loan
modification and assumption on July 9.

(Id. at ¶¶ 55-57.)

On September 18, 2014, during a court-ordered mediation in
Abbatematteo I, the parties signed a Settlement Terms Agreement in
Principal (“Agreement”). (Id. at ¶ 60.) There, the parties agreed
that if Plaintiff provided an application by November 15, Chase
would review it, and Arruda’s participation in the application
process would not be required.

(Id.)

Plaintiff submitted an

application before November 15, and the Court entered a Consent
Judgment, setting aside the foreclosure, returning the property to
Plaintiff, and stating the mortgage was valid, “subject only to a
modification and assumption agreement entered between the parties
which shall also be recorded in the official records of the City
of Providence.”

(Id. at ¶¶ 61, 63.)

Before providing Plaintiff

with a modification, Chase requested additional documentation on
December 9 and 23, 2014, and then again on June 14, 2015, after
Plaintiff had submitted another application for loan modification
and assumption.

(Id. at ¶¶ 65-68.)
2

On February 10, 2016, Fannie Mae, through Chase, scheduled a
foreclosure proceeding for April 4, and on April 1, Plaintiff filed
a petition for protection in United States Bankruptcy Court, where
she filed a request to participate in the Court’s Loss Mitigation
Program, and submitted yet another application for modification to
Chase around May 20, 2016.

(Id. at ¶¶ 69-71.)

Chase refused to

review Plaintiff’s application unless Arruda conveyed his interest
to Plaintiff.

(Id. at ¶ 72.)

So on August 26, 2016, Plaintiff

negotiated a quitclaim deed with Arruda, paying him $16,000 for
his interest, making Plaintiff the sole owner of the property.
(Id. at ¶ 73.)

Plaintiff provided a copy of the quitclaim deed to

Chase, along with her fifth (and final) application for a loan
modification.
On

(Id. at ¶ 74.)

January

application

18,

because

2017,

they

Chase

claimed

denied
they

Plaintiff’s

could

not

fifth

create

an

“affordable payment without changing the terms of the mortgage
beyond the modification program’s requirements.”
78.)
2017.

(Id. at ¶¶ 77-

Plaintiff requested an appeal of this denial on February 2,
(Id. at ¶ 84.)

Chase stated it would not respond to her

appeal until she proved she was the sole owner of the property.
(Id. at ¶85.)

On May 19, 2017, Plaintiff emailed the Rhode Island

Housing Resource Commission (“RIHRC”), who forwarded the email to
Chase and Fannie Mae, questioning why Plaintiff was denied a loan
modification and assumption.

(Id. at ¶ 88.)
3

Chase again told

Plaintiff it would not respond until she proved she was “the sole
name on the title.”

(Id. at ¶ 90.)

Plaintiff brought this action on July 14, 2017.
II.

Discussion
The Complaint contains six counts: one each for violation of

due process, breach of contract, breach of the covenant of good
faith and fair dealing, misrepresentation, breach of the covenant
of “extreme” good faith, and violation of 12 C.F.R. 1024.41. Chase
has moved to dismiss each of these counts insofar as they concern
it.
“To survive a motion to dismiss for failure to state a claim,
the complaint must contain sufficient factual matter . . . to state
a claim to relief that is plausible on its face.” Katz v. Pershing,
LLC, 672 F.3d 64, 72-73 (1st Cir. 2012) (quoting Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009)) (quotation marks omitted). When deciding
a motion to dismiss, the Court takes “the complaint’s well-pled
(i.e., non-conclusory, non-speculative) facts as true, drawing all
reasonable

inferences

in

the

pleader’s

favor.”

Schatz

v.

Republican State Leadership Comm., 669 F.3d 50, 55 (1st Cir. 2012).
Further, “[t]he Court may include in its analysis (a) implications
from

documents

attached

to

or

fairly

incorporated

into

the

complaint, (b) facts susceptible to judicial notice, and (c)
concessions in plaintiff’s response to the motion to dismiss.”

4

Lisnoff v. Stein, 925 F. Supp. 2d 233, 236 (D.R.I. 2013) (quotation
marks omitted).
A.

Count One: Due Process

Count One alleges Plaintiff’s property was deprived without
due process.

(See Compl. ¶ 96.)

Chase moves to dismiss this

claim, but as Plaintiff clarified in her response, Count One is
not directed at Chase.

(Mem. Supp. Pl.’s Obj. to Def.’s Mot. to

Dismiss (“Objection”) 6, ECF No. 12.)

Accepting Plaintiff’s

understanding of her claim, the Court will deny Chase’s Motion as
to Count One.
B.

Count Two: Breach of Contract

Plaintiff accuses Chase of breaching both the Agreement and
the Consent Judgment.

(See Compl. ¶¶ 103-07.)

When the Court is

sitting in diversity, the law of the forum state – in this case,
Rhode Island – applies.
78 (1938).

See Erie R.R. v. Tompkins, 304 U.S. 64,

And here, to make out a breach of contract, “the

plaintiff must prove both the existence and breach of a contract,
and that the defendant’s breach thereof caused the plaintiff’s
damages.”

Fogarty v. Palumbo, 163 A.3d 526, 541 (R.I. 2017).

Chase argues that the Agreement is not a contract, and that
even if it were, the bank did not breach it.
8.) These arguments fail.
Island law.

(See Mot. to Dismiss

The Agreement is a contract under Rhode

See Ross-Simons of Warwick, Inc. v. Baccarat, Inc.,

182 F.R.D. 386, 394 (D.R.I. 1998) (“[S]ettlement agreements are
5

treated

as

contracts

and

enforced

under

the

rules

governing

contracts generally.” (applying Rhode Island law)).

And Plaintiff

has alleged a breach of several of its provisions.

For example,

Plaintiff alleges Chase breached the Agreement “by failing or
refusing to review the Plaintiff’s application in accordance with
Fannie Mae’s guidelines.”

(Compl. ¶ 104; see also Compl. Ex. 27,

ECF No. 1-27) (outlining reasons why Plaintiff qualified for the
modification under either the Home Affordable Modification Program
or Fannie Mae’s Standard Modification Program).
Plaintiff also claims that Chase breached the Agreement when
it required Arruda to participate in the review of her application.
(Compl. ¶ 106.)
participation

And indeed, the Agreement is clear that Arruda’s

was

not

Plaintiff’s application.
22.)

necessary

until

after

the

approval

of

(See Compl. Ex. 22, at ¶ 10, ECF No. 1-

Therefore, Plaintiff states a plausible claim for breach

when she alleges Chase required her to obtain a quitclaim deed
from Arruda prior to the review of her application.

(See Compl.

¶¶ 73, 106.)
As with the Agreement, Chase argues that breach of the Consent
Judgment cannot give rise to a breach-of-contract claim.

And as

with the Agreement, Chase is wrong: the Consent Judgment can in
fact be enforced via a contract claim.

See Local No. 93, Int’l

Ass’n of Firefighters v. Cleveland, 478 U.S. 501, 519 (1986)
(“[C]onsent decrees have attributes of both contracts and judicial
6

decrees.” (quotation marks omitted)); Arrieta-Gimenez v. ArrietaNegron, 859 F.2d 1033, 1041 (1st Cir. 1988) (noting that consent
judgment is “no more than a judicially approved contract.” (quoting
Crowe v. Cherokee Wonderland, Inc., 379 F.2d 51, 54 (4th Cir.
1967))); McEntee v. Davis, 861 A.2d 459, 462 (R.I. 2004) (“A
consent judgment is a contract, subject to the rules of contract
law.”);

18A

Charles

Alan

Wright

&

Arthur

R.

Miller,

Federal

Practice and Procedure § 4443 (West 2d ed. 2018) (“The [consent]
judgment

results

not

from

adjudication

but

from

a

basically

contractual agreement of the parties.”).
Chase has a better argument against this particular claim,
though - namely, that the Consent Judgment does not, as Plaintiff
argues, require Chase to modify or assume Plaintiff’s loan.

(See

generally Def.’s Reply to Pl.’s Obj. (“Reply”), ECF No. 14.)

The

Consent Judgment states, in relevant part, “The mortgage and note
are hereby stipulated to be valid and of full force and effect,
subject only to a modification and assumption agreement entered
between the parties which shall . . . also be recorded in the
office records of the City of Providence.”
2; ECF No. 1-23.)

(Compl. Ex. 23, at 1-

Chase says of this language that it does nothing

to require the bank to modify Plaintiff’s loan; instead, it merely
commands that if the parties enter a modification agreement, that
agreement must be recorded.

(See Reply 4.)

7

Chase’s reading is not implausible.
reproach, either.

But it is not beyond

The most straightforward reading of the clause

is that the mortgage and note are subject to a modification
agreement already entered by the parties.
court

meant,

agreement.

however,

because

there

This cannot be what the

has

never

been

any

such

Another way to interpret the clause as consistent with

this reality – that is, a way other than what Chase proposes by
reading the conditional “if” into the clause – is to give “entered”
a

future-perfect

gloss:

“subject

only

to

a

modification

and

assumption agreement [to be] entered between the parties.” (Compl.
Ex. 23, at 2.)

This reading comports with Plaintiff’s view that

the Consent Judgment assumed that Chase would modify the loan.
Further evidence in favor of Plaintiff’s exegesis is the word
“shall,” which denotes necessity: if a modification agreement must
be recorded, it must first – the argument goes – be entered into.
See Anderson v. Yungkau, 329 U.S. 482, 485 (1947) (“The word
‘shall’ is ordinarily ‘the language of command.’”).
The foregoing persuades the Court that the Consent Judgment
is ambiguous as to whether it makes entry into a loan modification
agreement mandatory. See Bliss Mine Rd. Condo. Ass’n v. Nationwide
Prop. & Cas. Ins., 11 A.3d 1078, 1084 (R.I. 2010) (“A contract
. . . is ambiguous when it is reasonably susceptible of different
constructions.”

(quotation

marks

omitted)).

And

because

the

meaning of an ambiguous contract term is a question of fact,
8

Botelho v. City of Pawtucket Sch. Dep’t, 130 A.3d 172, 177-78 (R.I.
2016), which at this stage must be answered in Plaintiff’s favor,
Schatz, 669 F.3d at 55, the Court finds that Plaintiff has made
out a claim for breach of the Consent Judgment.

See Clukey v.

Town of Camden, 717 F.3d 52, 59 (1st Cir. 2013) (“[A]mbiguous
contract provisions foreclose dismissal of complaint . . . .”).
C.

Count Three: Good Faith and Fair Dealing

Plaintiff alleges Chase violated the implied covenant of good
faith and fair dealing in both the Agreement and Consent Judgment.
(Compl. ¶ 111.)

Rhode Island recognizes an implied covenant of

good faith and fair dealing in every contract.

See Centerville

Builders v. Wynne, 683 A.2d 1340, 1342 (R.I. 1996).

“The implied

covenant of good faith and fair dealing ensures that contractual
objectives

may

be

achieved,

and

that

neither

party

shall

do

anything which will have the effect of destroying or injuring the
right of the other party to receive the fruits of the contract.”
McNulty v. Chip, 116 A.3d 173, 185 (R.I. 2015) (citations and
quotation marks omitted).
The

Court

need

not

delve

into

the

propriety

of

Chase’s

conduct, however, because “a claim for breach of the duty of good
faith and fair dealing is precluded where the claim arises from
the same factual allegations as a breach of contract claim.”
v. GE, 544 F. Supp. 2d 103, 109-110 (D.R.I. 2008).
when

a

plaintiff’s

claim

for

breach
9

of

the

Roy

In other words,

implied

covenant

“essentially incorporates by reference the allegations in the
previous claim for breach of contract, it must be dismissed.”

Id.

at 110 (quotation marks omitted); see also McNulty, 116 A.3d at
185 (“[A] claim for breach of the implied covenant of good faith
and fair dealing does not create an independent cause of action
separate and apart from a claim for breach of contract.”).
here

Plaintiff

reuses

her

breach-of-contract

And

allegations

to

support her implied-covenant claim. The Court will therefore grant
Chase’s Motion to Dismiss as to Count Three.
D.

Count Four: Misrepresentation 1

Chase argues that Plaintiff’s misrepresentation claim should
be dismissed because nowhere in the Agreement or Consent Judgment
does it say that Chase was required to modify Plaintiff’s loan.
The problem with this argument is it rests on a question of fact
– which, as discussed directly above, must be construed at this
stage in Plaintiff’s favor - whether such a requirement exists.
Chase’s argument thus fails; Plaintiff’s misrepresentation claim
can stay.
E.

Count Five: Breach of Extreme Good Faith

The doctrine of “extreme good faith” is discussed in Fenley
v. Cassidy, where the court stated that “extreme good faith . . .

1

Plaintiff acknowledges that there are two claims labeled
“Count III.” (Objection 12 n.3.) For clarity’s sake, the Court
takes the liberty of renumbering.
10

is required by the trust relation subsisting between the parties.”
43 A. 296, 297 (R.I. 1899).

This century, however, courts have

recognized that while such duty may have existed “in a previous
era in limited circumstances, it has long since been subsumed.”
Pemental v. Bank of N.Y. Mellon, No. 16-483S, 2017 WL 3279015, at
*5 n.11 (D.R.I. May 10, 2017).

This claim will therefore be

dismissed.
F.

Count Six: Regulation X Violation

The Real Estate Settlement Procedures Act was enacted to
“provide consumers with greater information and protect them from
certain abusive practices.”

First Fed. Sav. & Loan Ass’n v.

Greenwald, 591 F.2d 417, 420 n.5 (1st Cir. 1979) (citing 12 U.S.C.
§§ 2601 (2018)).

Enacted pursuant to RESPA, 12 C.F.R 1024.41 –

i.e., “Regulation X” – provides home-loan borrowers with various
protections, see, e.g., 12 C.F.R. § 1024.41(b)(1), some of which
Plaintiff accuses Chase of violating, (see Compl. ¶¶ 78, 84-85,
88-90, 131).
Chase argues its relationship to Plaintiff is not covered by
Regulation X because she was not a party to the note.

Plaintiff

was, however, named as a “Borrower” in the mortgage and subject to
the covenants therein.
15, ECF No. 1-17.)

(See Objection 18; Compl., Ex. 17, 1-5,

She can thus sue under Regulation X. 12 C.F.R.

§ 1024.41(a) (“A borrower may enforce the provisions of [Regulation
X] pursuant to section 6(f) of RESPA.”); see also Frank v. J.P.
11

Morgan Chase Bank, N.A., No. 15-cv-5811-LB, 2016 WL 3055901, at *4
(N.D. Cal. May 31, 2016) (finding Deed of Trust referring to
plaintiff as “borrower” sufficient for RESPA to apply, though she
did not sign promissory note).
III. Conclusion
For the above reasons, Chase’s Motion to Dismiss (ECF No. 10)
is GRANTED as to Count Three (good faith and fair dealing) and
Count Five (extreme good faith).
DENIED

as

contract),

to

Count

Count

One

Four

(due

Chase’s Motion to Dismiss is

process),

Count

(misrepresentation),

(Regulation X).
IT IS SO ORDERED.

William E. Smith
Chief Judge
Date: July 17, 2018

12

Two
and

(breach
Count

of
Six